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NACM Endorses H.R. 776, the Security in Bonding Act

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The Honorable Sam Graves
United States House Committee on Small Business
2361 Rayburn House Office Building (RHOB)
Washington, D.C. 20515

Dear Chairman Graves:

The National Association of Credit Management (NACM) has represented the interests of the nation's business trade creditors for more than a century. Since its formation in the late 19th century, advocating for the legislative needs of these businesses, who supply the lifeblood of the American business economy in the form of commercial credit, has been a cornerstone of NACM's mission. In this capacity, acting directly on behalf of our construction industry members, we write you today to offer our support to H.R. 776, the Security in Bonding Act, scheduled for markup in your Committee this week.

Commercial credit, collections and financial risk management professionals that work in the construction industry for subcontractors and materials suppliers comprise more than 50% of NACM's membership. These individuals manage the complex process of extending credit to other companies while navigating the numerous rules and requirements that govern how work is performed on, or materials are supplied to, a public or private project. Payment on these projects is often secured through the use of liens, bonds and Uniform Commercial Code (UCC) filings.

Federal Reserve Payments

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The Federal Reserve is asking for comments from the business community as part of its study on the perceived problems (and solutions) regarding electronic and other types of payment systems. Perceived problems include increased potential/risk for fraud, international transactions, timeliness of funds availability and efficiency gaps. If you’d like to learn more about these topics, you’ll find more details in the Federal Reserve report titled Payment System Improvement–Public Consultation Paper.

Online Survey

As part of this effort, the Fed has created an online survey to assist it in learning about the problems and issues end users currently find problematic.

We encourage all credit professionals to complete this survey, which can be found at

This online survey will be available through December 13. The Fed wants to learn what business credit professional currently find problematic, what needs to change and how the Fed can help. It’s exciting to know that NACM membership can assist the Federal Reserve in creating potential guidance or regulations that will steer the future of electronic payments.

Town Hall Meetings

Along with the online survey, another vital component of the process and way for NACM members to be heard is to attend any one of a series of Town Hall meetings the Fed will host to discuss the issue. NACM believes it is important that members attend these meetings to represent the B2B creditor segment of payment-systems end-users and illustrate the vast differences between business-to-consumer and B2B transactions.

We hope that you will help mobilize a group of members and attend meetings in your respective areas:

  • November 12      1 p.m.- 4 p.m. (EST)                                Federal Reserve Bank of Atlanta
  • November 13      1 p.m.- 4 p.m. (EST)                                Federal Reserve Bank of Cleveland
  • November 14      8:30 a.m.- 11:30 a.m. (CST)                   Federal Reserve Bank of Chicago
  • November 15      8:30 a.m.- 11:30 a.m. (PST)                   Federal Reserve Bank of San Francisco
  • November 18      8:30 a.m.- 11:30 a.m. (EST)                   Federal Reserve Bank of Boston
  • November 20      8:30 a.m.- 11:30 a.m. (CST)                   Federal Reserve Bank of Dallas

More information is available about each town hall meeting at this link.

Free Informative Teleconference

On November 5, Sean Rodriguez, senior vice president of industry relations for the Federal Reserve System, will discuss the main themes of the Fed’s research to date during an NACM-hosted teleconference that is exclusive (and free) for members. He will also address questions and comments from NACM members on the issues raised in its published paper mentioned above. Click here for more information on the event.

NACM Reiterates Opposition as Virginia Continues Consideration of Commercial Credit Reporting Bill

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The National Association of Credit Management (NACM) reiterated its opposition to Virginia House Bill 2198 this week as policymakers in the Commonwealth continue to consider the bill's ramifications ahead of the next legislative session in 2014.

Most recently the Virginia Small Business Commission received a preliminary report from an ad hoc committee formed specifically to study HB 2198. The committee requested that any other input from interested parties, such as NACM, be submitted to the committee by October 25. Once all this information is collected, it will be compiled into a final report from the committee after their next work group meeting on November 14, the results of which will be presented to the full Small Business Commission at their next meeting in December.

The Small Business Commission can then make a recommendation either in support of or in opposition to the bill, or it can offer no recommendation at all. However, the Commission's actions are not binding on the bill, and HB 2198 is expected to be part of the Virginia Legislature's agenda in the coming session.
NACM continues to oppose HB 2198 on the grounds that it would make it harder for commercial credit managers to get the information they need to make decisions on potential customers, and that the bill represents a fundamental misunderstanding about the way credit professionals use credit reports not as a reason to deny a company credit, but as a tool that lets them find out more about the customer so that they can find ways to sell to companies despite their adverse credit history.

Committee Recommends Ditching Identification Provisions on Virginia Credit Reporting Bill

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A report prepared by an ad hoc committee formed to study a Virginia bill that would affect commercial credit reporting in the state suggested removing some of the legislation's most controversial provisions, including a requirement that commercial credit reporting agencies identify the source of so-called "negative information" to the subject of a report.

The committee, formed within the Virginia Small Business Commission to study House Bill 2198, presented the report to the full Commission at its meeting this week. After briefly introducing and submitting the report, the Commission urged proponents and opponents of the bill to continue their work on the legislation with the ad hoc committee's report in mind. State Senator and Commission Chair Frank Ruff, Jr. (R) urged the bill's sponsor, Delegate Michael Watson (R), to be prepared to compromise on any final legislation that emerges from the debate over HB 2198.

Recommendations in the ad hoc committee's report indicated a great degree of trust in the commercial credit reporting world's existing self-regulatory format, wherein subject companies can already view their report should they like to, and errors are rare and inaccuracies are quickly addressed. "We agree that while both sides have their own unique concerns, there are procedures in place within the credit reporting industry to provide an avenue for businesses to contest erroneous information," said the report. "While this system appears to have its own flaws, we must defer to the individual commercial credit reporting agencies (CCRAs) to conduct their operations in a manner appropriate to their industry."

Debate over HB 2198 Continues at Recent Virginia Small Business Commission Meeting

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The Virginia Small Business Commission continued its study of House Bill 2198 last week with the meeting of an ad hoc committee specifically formed to study the legislation, which would affect commercial credit reporting in the Commonwealth. NACM was in attendance, providing the committee with a necessary perspective from commercial credit professionals that has otherwise been absent from the debate.

Led by Small Business Commission civilian members Owen Van Syckle and Robert Marcus, the meeting began with a discussion of the bill's intent by Delegate Michael Watson, the author and sponsor of HB 2198. Watson, along with two representatives from a local Virginia business that support the bill, noted that the legislation was designed to address a perceived gap in the rights of businesses to identify the source of so-called "negative information" on the commercial credit report. He said that businesses are denied the ability to improve their credit by the currently anonymous way that historical payment information about them is displayed in their credit report.

Richmond-area NACM member Doug Strobel of Titan America, who provided vital testimony at the Small Business Commission's last hearing in June, again offered the perspective of a trade supplier, explaining how he uses commercial credit reports and how he conducts an assessment of a potential customer's creditworthiness. Strobel also discussed how important credit information is to a credit report, and how such reports are integral to his ability to make a fast, accurate credit decision, once again making the case that HB 2198 could limit the amount of information available on businesses in Virginia by requiring commercial credit reporting providers to identify the source of "negative information" on a report.

Virginia Small Business Commission Schedules New Hearing on Commercial Credit Reporting Bill

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The Virginia Small Business Commission scheduled another meeting later this month to discuss the future of House Bill 2198, which could affect the exchange of commercial credit information on businesses in the commonwealth.

According to the Commission's website, the next meeting will take place on August 29 in Richmond, VA. While no agenda has been made available to the public as yet, NACM has been in contact with Commission staff members who have made it clear that the meeting will consist of the HB 2198 workgroup, a group of proponents and opponents of the bill that was informally established at the Commission's last meeting in June.

NACM has opposed HB 2198 since its introduction and will attend the hearing on August 29 to continue to ensure that the interests of unsecured trade credit grantors are considered by Virginia legislators. The results of the workgroup's efforts in August will be presented to the full Small Business Commission at their next meeting on September 10.

VA Small Business Commission Makes No Recommendation on HB 2198, Urges Parties to Work Together on Legislation

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At its meeting on June 26, the Virginia Small Business Commission made no recommendation about whether to support or oppose House Bill 2198, which would affect commercial credit reports in the commonwealth. It did, however, urge both parties in favor of and against the bill to work together to find common ground to address a perceived problem regarding the rights of the subject of a commercial credit report.

NACM has opposed HB 2198 since its introduction and was on hand at the meeting to make the case against the bill's identification provision. This measure would require commercial credit reporting agencies to make the source of a certain piece of information on a commercial credit report known to the subject of that report, if the information was considered "negative," a term the bill fails to define.

Virginia Delegate Michael Watson (R), who originally introduced HB 2198, was on hand at the meeting to make his case in favor of the bill, supported by a number of his colleagues from the House of Delegates. Specifically, Watson framed the bill as fundamentally pro-business and drew comparisons to the rights of consumers as they pertain to accessing and amending their credit reports, arguing that Virginia businesses should have the same rights.

NACM's Response to Associated Press Article about Credit Reports and Small Businesses

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The following is NACM's official response to an Associated Press article about credit and small businesses that ran in several mainstream media outlets last week.

Dear Associated Press Editors,

An AP article that ran in several news outlets, titled "How small businesses can avoid loan rejections" and written by AP small business reporter Joyce Rosenberg, had good intentions and a considerable amount of important information for small businesses seeking to improve their commercial credit standing. However, while it focused on the relationship between small businesses and their banks, it completely ignored the important relationship between small businesses and their suppliers. It is this relationship that defines the commercial credit score for all businesses.

Further, the article missed the fact that Dun & Bradstreet Credibility Corp. (DBCC), whose CEO provided all of the article's quotations, is a by-product of a greater problem regarding consumer and commercial credit. The problem, in short, is that not many people recognize the vast differences between how consumer credit and commercial credit are extended, as well as how consumer creditors and commercial creditors are assessed for creditworthiness.

Regrettably the article failed to note that DBCC's primary product is a credit monitoring service which is sold to businesses for a fee. It's a carbon copy of countless other credit monitoring services offered to consumers by credit bureaus, financial institutions and other companies. While both consumers and businesses can monitor their own credit reports and address discrepancies for free, what DBCC's business model represents is an attempt to take a consumer product, and apply it in a commercial setting.

Virginia Bill Could Affect Commercial Credit Reports

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The current version of a bill in the Virginia House of Delegates, HB 2198, would require commercial credit reporting agencies to identify their sources of "negative information" when they provide a copy of a report to its subject. This would mean that Virginia buyers would know the identities of the sellers that shared any of their negative payment history with a commercial credit reporting agency should they choose to dispute the information on their report.

However, according to the office of Delegate Michael Watson (R-James City/York Counties), the bill's chief patron, and other industry sources, an amendment to the bill that would eliminate this requirement is forthcoming. The text of such an amendment has yet to be made public.

Still, the bill would also require agencies to provide Virginia businesses access to a free annual credit report and would allow the subject of a commercial report to dispute parts of their report that they believe are inaccurate. After receiving the subject's complaint, the commercial credit reporting agency would have 30 days to either delete the statement or include a note in the report saying that the subject of the report has disputed a particular piece of information.

Few Satisfied by Last Minute Fiscal Cliff Deal

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A deal was reached to ameliorate the effects of the United States going over the so-called "fiscal cliff" on January 1, but few seem satisfied with the legislation.

The bill, dubbed the American Taxpayer Relief Act of 2012, initially passed through the Senate in the early hours of 2013 by an overwhelming 89-8 vote. It faced a less certain future in the House of Representatives, but the bill eventually overcame a Republican party split to successfully emerge from the lower chamber in a 257-167 vote.

Even the legislation's supporters framed it as a stopgap measure that did what was necessary to neutralize the cliff's automatic spending cuts and tax increases, which took effect on January 1, but did little more than that. "There's more work to do to reduce our deficits, and I'm willing to do it," said President Barack Obama. "But tonight's agreement ensures that, going forward, we will continue to reduce the deficit through a combination of new spending cuts and new revenues from the wealthiest Americans."

According to the Congressional Budget Office (CBO), the Act will reduce the country's deficit by $737 billion, mainly due to a tax increase on individuals earning more than $400,000 a year and households earning $450,000. While the bill also makes $107 billion worth of spending cuts, Republican leaders promised substantially greater reductions in the future, while trying to shift the blame to the White House when possible. "With the revenue piece settled, Washington must now turn to solving the rest of the fiscal cliff—the out-of-control spending that has led to record debt and deficits under President Obama," said House Ways and Means Committee Chairman Dave Camp (R-MI).

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